Recent calls for the government to scale back on its ambitions to enhance worker rights will no doubt resonate with many businesses. There is a plethora of evidence that higher NICs and increases to the national minimum wage has acted as a deterrent to hiring. However, potentially the worst is yet to come with guaranteed hours legislation.
A corner stone of business recovery has historically been the ability to use temps and contractors via agency supply. The availability of temps to help build business confidence before taking on full employment, has long been accepted as an advantage. Yet this itself is now under threat by the planned zero hours/guaranteed hours legislation included in the Employment Rights Act 2025, the subject of a consultation announced today 2nd June.
The rules require a hirer, after a reference period, to compulsorily offer guaranteed hours of work under a direct contract to its temporary workers including those supplied through agencies. The hours should mirror those being worked at the time of the offer.
If a hirer fails to do this it will be breaking the law and the worker can make a Tribunal claim. If an offer is made and accepted the supply by the agency would end regardless of any contract between agency and hirer. So potentially the advantage of having a temp or contractor without longer term obligation will be lost to the hirer, and the advantage to an agency of having a longer term booking for a supply will also be gone.
What can be expected from this measure, will it lead to more job security for workers as hoped for by the government? Will it enhance or detract from the growth that is needed for our economy? Is it even necessary for the majority of workers?
From an agency’s perspective the answer to these questions is likely to be a resounding ‘No’. The service of supplying workers and contractors temporarily is what has helped businesses grow. There can be no halfway house. A booking for 6 months, giving the hirer the knowledge that the resource is available on temporary terms for that period, is useless if that hirer is forced to offer a permanent place after 12 weeks or even at the end of the 6 month period. The same would apply if a booking is for 12 months or longer. Whatever the period, choice is being removed from the hirer, and the flexibility to continue to service hirers with temporary workers is being removed from agencies.
If this measure is put in place as planned for 2027, hirers may try to shorten their booking periods to less than the reference period in an attempt to circumvent any anti avoidance measures. This will likely force churn, increase cost and the overhead that comes with training new temporary workers. Hirers will have to manage these hirings, again at cost.
At the same time where an offer is made and accepted by the worker, hirers will be reluctant to pay any transfer fees to the agency for engaging the worker on a direct contract. Transfer fees compensate recruitment businesses for the loss of their resource, namely the supplied worker. In the absence of that compensation agencies will have to balance their books in other ways, such as increasing their charge rates to hirers so putting up hirer costs again.
On the other hand, the measure may have no positive effect unless workers take up the offers that are made. This measure being rolled out when, according to a government report, over 80% of agency workers are happy with their arrangements. So little or no take up by agency workers would mean the measure will simply have been a costly distraction. Only time will tell.
Also as agency supply costs increase, longer term temporary work enjoyed by many may become less available, so risking the ability for workers to obtain temporary work other than on a short term basis. This may suit a few, but would the majority of agency workers not then be in a far less secure position, having to look for new work on a regular basis? None of this can improve efficiency or security.
The measure is contained in the ERA and so cannot be simply abandoned. Or can it? My first thought is that it should be parked for a long time until the country is back on its feet. However even with a consultation now announced, this probably isn’t going to happen because of the politics. So as a fall back let’s look at the reference period. It’s open for debate in the consultation as are a number of other aspects. Quite clearly the period should be as long as possible if business is to be supported.
There is temptation to link the period to other existing periods, such as the 12 weeks qualifying period for rights to apply under the AWR; or 2 years being the time limit that HMRC has on recognising temporary work as actually being temporary for the purposes of tax reliefs. Why be tempted in this way? Surely the only valid argument in today’s economic climate is that the period should be so long as not to interfere with flexibility within the workforce such that there is no negative impact on our economic recovery. Yet the government’s preferred period seems to be 12 weeks, which may cause mayhem.
Only when this issue is resolved can businesses realistically plan for the future. The recruitment industry stands ready to support businesses and the economy, so let’s pull together and work it out for the benefit of all.
Adrian Marlowe
Chair, the Association of Recruitment Consultancies
